An Investigation on the Month of the Year Anomaly in the Nairobi Securities Exchange in ,kenya
Abstract
The question of whether there exists market anomaly in stock market has been the subject of
research. Anomalies are the indicator of inefficient markets; some anomalies happen only once
and vanish, while others happen frequently, or continuously. This study sought to investigate
whether monthly market anomalies exist at the NSE and whether they are persistent over time if
present. The study relied on monthly closing NSE 20- share index data from 1st January 2010 to
31st December 2013 from the Nairobi Securities Exchange. Data collected from NSE database
was analyzed by use of descriptive statistics with the help of Statistical Package for Social
Science (SPSS Version 21.0). The t-test statistic with significance level of 0.05 was employed to
test the significance of the average monthly returns while p-value was used to test for
persistence.
The summary statistics reveal that the average returns and standard deviation on each month of
the year varies .Two months presented significant P-value; March (the second period), and July
(the whole period).Apart from March and July, no other Month-of-the-Year effect was observed
from the data .Finally it was evident that there is no persistence of the monthly effect, since the
March effect (2012-2013) and the July effect (the whole period 2010-2013) only appear one time
respectively. The results are inconsistent with the efficient market hypothesis, thus suggesting
that the Nairobi Securities Exchange is inefficient. These findings may have useful implications
for trading strategies and investment decisions; investors may look to gain from managing the
risk of their portfolios due to time varying volatility documented in the findings of this thesis.
Citation
Master Of Science In Finance, School Of Business, University Of Nairobi,2014Publisher
University of Nairobi